Mumbai, Jan 16: Driven by fears that a war in Iraq may force them to repatriate, Indians based in the Gulf are sending their money home, swelling foreign exchange reserves to record levels and shoring up rupee sentiment. India's forex reserves, the world's seventh-largest at $70.75 billion and equivalent to 14 months of imports, could top $80 billion by March, analysts said.
For overseas Indians, their banking system offers a safer refuge than the Gulf even though India suffers from its own problems with political risk. Nuclear rivals India and Pakistan came close to war last year over Kashmir.
More than three million of India's 20 million overseas Indians work in the Gulf and interest rate differentials of nearly 200 to 250 basis points between the rupee and foreign currency deposits were an added attraction, traders said.
"A lot of the expatriates' money is in anticipation of a war," said V. Srinivas, chief forex dealer at JP Morgan Chase in Bombay. "They also seem to be comfortable about India's external position."
The record reserves have encouraged global rating agency Moody's to declare it may raise the country's forex debt rating from "Ba2" in February. Bureau Report